Nikkei down slightly on caution ahead of earnings, economic uncertainty
By Hideyuki Sano TOKYO, April 24 (Reuters) - Japanese shares were down slightly on Thursday morning, as investors were reluctant to bid up prices ahead of the looming earnings season and lingering worries over the economic impact of a sales tax hike that kicked in this month. The Nikkei share average dropped 0.4 percent to 14,482.72, pulling further away from a two-week high of 14,650 hit on Monday. Over the past few days it has been stuck around its 52-week moving average, now at 14,563. "On the whole, investors assume the Japanese economy will recover after a slowdown due to the sales tax hike. But their conviction is not strong, which is why they aren't buying Japanese shares even though their valuation is relatively cheap," said Masayuki Doshida, senior market analyst at Rakuten Securities. The sales tax hike to 8 percent from 5 percent on April 1 is expected to dent consumption in the current quarter, but some analysts worry that the impact on growth could be far greater than policy makers anticipate. The market's immediate focus turned to a meeting of U.S. President Barack Obama and Japanese Prime Minister Shinzo Abe, who are expected to discuss a two-way trade pact seen as crucial to a broader trans-Pacific agreement. A trade deal could benefit Japan's major exporters such as car makers in the medium-term. Abe has touted the broader trade deal as vital for growth in the world's third-biggest economy, but faces tough domestic opposition to opening up agricultural market. Mollifying Japan's powerful farmers' lobby and completing a successful trade pact is seen as a key test on whether Abe can deliver the third arrow, or structural reform, to go with two others that's already been deployed -- fiscal and monetary stimulus measures. The two leaders are due to hold a news conference at 0315 GMT. Most investors were keeping a quiet presence ahead of earnings guidance from a large number of Japanese companies for their financial year to March 2015, expected from Thursday onwards. Shin-estu Chemical and Hitachi Construction are among the companies that announce earnings on Thursday, followed by Nikkei heavyweight Fanuc and Denso on Friday. Large-cap shares led the decline, with an index of 30 large-cap shares falling 0.8 percent compared to the overall market's fall of 0.5 percent. Both Toyota Motor and Denso fell 1.6 percent. NTT Docomo fell 1.7 percent and SoftBank dropped 1.3 percent after U.S. telecom sector shares underperformed following earnings of AT&T. In contrast, some recently battered mid-cap shares got a bit of respite. Aoki Holdings rose 2.2 percent to extend its gains so far this week to 6.1 percent, outstripping the 0.8 percent gain in the Nikkei. The suppliers of Apple had a mixed session so far despite sharp gains in the iPhone maker's shares after its announcement of first quarter earning and share buybacks. TDK Corp was flat while Taiyo Yuden fell 0.9 percent. "The jump in Apple shares may have more to do with its capital policy, rather than the strength in the earning," said a fund manager at a Japanese asset management firm. The new JPX-Nikkei Index 400 dipped 0.5 percent to 10,632.65. (Editing by Shri Navaratnam)
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